Government shutdown is brewing trouble for America’s craft beer makers

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Jan. 12, 2019, 4:53 AM GMT

By Ethan Sacks

There’s trouble brewing in the craft beer industry over the government shutdown.

Because the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) has been furloughed by the partial government shutdown, breweries have been unable to secure necessary approvals from the agency’s tax and trade bureau — ranging from permits for new facilities to new labels on cans.

In a business dependent on releasing and marketing new beers regularly to quench its customers’ expectations for novelty, those delays could potentially be financially devastating.

“It’s really that question mark that’s the scary part, because we don’t have that end in sight,” Mariah Scanlon, brand manager for Smuttlab, a line from Smuttynose Brewing Company in Hampton, New Hampshire, told NBC News.

“You can’t develop a contingency strategy without knowing how long [the shutdown] is going to go on.”

Snaccident by Smuttlabs, a division of Smuttynose.Courtesy Smuttynose

To ship beer over state lines, breweries need certificates of label approvals from the ATF’s trade bureau for any new packaging or beer branding. Last year alone, the government agency processed 34,166 label applications for malt beverages, an average of 93.6 a day, according to the trade group, the Brewers Association.

Brewers producing new recipes that fall outside the bureau’s pre-approved list also require a formula approval.

As the shutdown lingers, a backlog of those requests continue to pile up, ensuring that the approval delays will stretch even after the the bureau gets back to work.

“It’s tough being a small owner and the craft beer industry is a tough industry to be in,” said Rob Burns, co-founder and president of Night Shift Brewing in Everett, Massachusetts.

“Business is really so unpredictable and fragile and things that are completely out of control can have a big impact on us,” Burns said.

“It’s not just us that gets hurt, it’s also the retailers and bar owners. I think the damage of this situation is going to be really hard to calculate and far reaching.”

Jan. 10, 201901:41

Particularly hard-hit have been those waiting for the processing of “brewer’s notices,” permits for new breweries or expansions of existing facilities. The latter has left a bad taste in the mouths of the ownership of the Alementary Brewing Company in Hackensack, New Jersey.

Co-owner Michael Roosevelt told “NBC Nightly News” anchor Lester Holt on Thursday that the company recently invested $1 million in capital equipment and other costs to lease a new facility across the street from its current brewhouse to increase production.

Without official approval, it’s become little more than an anchor threatening to submerge the company deep into debt.

“I’m feeling the pinch right now because…I was expecting that approval this month,” Roosevelt said. “I’m spending about a thousand dollars a day between my lease, utilities and the equipment and I was expecting to start seeing some revenue in the next couple of weeks.

“With the shutdown continuing for who knows how long I don’t know when I’m going to get some revenue which means that I’m going to quickly get to a point where I don’t have a thousand dollars a day to keep spending.”

In a sign of how much the lapse in appropriations is slowing down the ATF, a representative told NBC News that the agency is no longer officially responding to requests for comment on any subjects not related to national security.

“There is one part of the TTB that is still operational: They’re still collecting beverage excise taxes,” said Jen Kimmich, co-owner of Alchemy Beer, the maker of Heady Topper, a favorite of IPA connoisseurs, referring to the tax and trade bureau.

While the permits are necessary for breweries across the industry, the bureaucratic standstill is hitting midsize companies particularly hard, said Burns. Smaller breweries that just serve their beer in taprooms or at local bars do not need the approvals, and the larger industry titans, like Anheuser-Busch, can easily absorb the financial hit with their signature brands. It’s the mid-tier breweries that have taken the biggest hit.

“The craft beer industry accounts for more than 23 percent of the $111.4 billion U.S. beer market, and small breweries and beermakers introduce new and seasonal products with less lead time than larger breweries, making delays in permits are particularly impactful.” Brewers Association President and CEO Bob Pease said in a statement.

Many of the affected breweries have been forced to improvise.

Cape May Brewing Co. had drawn up plans months ago to introduce a new beer called Eminently Drinkable at Boston’s prestigious Extreme Beer Festival — down to the recipe, the design and the label. Once the shutdown threw the applications in limbo, however, the brewery scrambled to come up with a plan B in time.

“We did have a brand-approved label for a Beer Name Ale that was originally just meant to be a placeholder,” says marketing director Alicia Grasso. “So now we’re going to Boston under that name.”